Rialto takes gamble on In-N-Out Burger

RIALTO - The City Council is serious about bringing In-N-Out Burger to the city, so much so that it's willing to absorb a $363,460 loss to the Redevelopment Agency to expedite its construction.

The city has committed about $2.4 million in agency money to install infrastructure and a sign at the freeway adjacent site where In-N-Out and two other restaurants are planned, but officials anticipate recovering less than $2.1 million of that expense.

"In-N-Out had a number of sites they were looking at in surrounding cities and we kind of had to sweeten the pot to get them to commit to Rialto and build it as quickly as they could because we think it'll be a jump-start for the other (businesses) in that area," said Councilman Ed Scott.

The council unanimously approved a contract with developer Fernando Acosta, who owns franchise restaurants in the city such as Popeyes and Farmer Boys, to manage and market the project.

It could pay him up to $346,000 if he's able to successfully negotiate sale agreements for all three parcels planned at 1925 N. Riverside Ave., the former site of Fire Station 202.

Officials estimate sale of the parcels would produce just under $2.1 million. If Acosta is able to negotiate sale prices in excess of that figure he would receive 50 percent of the additional revenue, a city report says.

The agency is taking on the role of the developer by assuming the financial risk, said Redevelopment Director Robb Steel. Acosta is a consultant who will act as project manager with the same incentive a developer would have to aggressively market the site - money.

"We're buying that expertise ... (Acosta) can perform and that's kind of the critical component he brings," Steel said. "He's focused. He makes money when he delivers."

Acosta is closely connected with the businesses community and more capable of managing and marketing the project than agency staffers, Steel said.

Of the $2.4 million, about $250,000 is spent and $500,000 is committed to demolish existing structures, Steel said. The remainder will go to Acosta and to fund infrastructure improvements that include streets, plumbing and a freeway sign.

Scott said Acosta was instrumental in luring In-N-Out and he's working to bring Miguel's Jr. to the site, a Mexican restaurant chain with 11 Inland Empire locations. Acosta has yet to announce a potential buyer for a third, sit-down restaurant planned at the site.

Buyers will pay development impact fees, but it's possible the council may decide to waive some of those fees for In-N-Out, Steel said.

Steven Greenhut, director of the Journalism Center at San Francisco-based Pacific Research Institute and editor-in-chief at calwatchdog.com, has emerged as a fierce opponent of redevelopment agencies and supporter of Gov. Jerry Brown's plan to dissolve them.

He called the project a prime example of an agency using public dollars to benefit consultants and hand-picked businesses.

"Subsidizing an In-N-Out burger or any business is questionable. If there's a big market demand for In-N-Out in that area then they're going to build a (restaurant), but it might not be in Rialto," Greenhut said. "This is why cities complete with one another because they desperately want the tax revenue."

Rising pension liabilities have local governments up and down the state scrambling to find ways to fund them. Luring prominent chains and big-box retailers with subsidies is common because it's a safe bet they'll generate substantial tax money governments use for discretionary spending, Greenhut said. This can result in a business choosing a site in the city that offers the most subsidies, Greenhut said.

Councilman Joe Baca Jr. said the agency is investing in a project many residents have specifically requested.

"More people have asked for In-N-Out than anything else," Baca said. "I think there's long-term gains here when compared to the short term investment."

The city has also worked with small, mom-and-pop businesses by waiving certain fees or allowing business owners to pay them in installments over time, Scott said.

"It all comes down to whether a city is business friendly," Scott said.